GDP Data Not a Tone Setter of Employment Rates

The following table, courtesy of Real Time Economics Blog [RTE], underscores the fact that a positive GDP number doesn’t always equate growth in employment rates.

In FY2008 Alaska’s output contracted by 2%, more than any other state in the union. Yet, the state’s employment rate grew by 1.5%. In contrast, Colorado, with a GDP gain of 2.9%, and among the states with the fastest GDP growth, saw its employment numbers recede to 1.2%. Intuitively, this suggests a negative productivity growth, which despite positive GDP numbers, restricts the economy’s ability to generate enough demand to lead employers to expand their workforce.

As RTE rightly points out, “the job market in both states serves as a reminder that conflating GDP with the economy isn’t always wise.”